DPP 2016 – The long and short of it

SP's MAI - - MILITARY VIEWPOINT - The views ex­pressed herein are the per­sonal views of the author.

The De­fence Pro­cure­ment Pro­ce­dure 2016 DPP) was re­leased by De­fence Min­is­ter Manohar Par­rikar on March 28, 2016, co­in­cid­ing with the in­au­gu­ra­tion of De­f­expo 2016 in Goa – show­ing how much In­dian de­fence has hap­haz­ardly pro­gressed. That un­like Delhi no mid level of­fi­cers who take pro­fes­sional de­ci­sions could visit De­f­expo 2016 is an­other is­sue – only top brass meet­ing top brass from abroad.

As a pre­lude to DPP 2016, when the De­fence Ac­qui­si­tion Coun­cil (DAC) cleared the clause of in­creased off­set base­line from 300 crore to 2,000 crore be­sides fo­cus­ing on re­duc­ing de­lays in pro­cure­ments, the De­fence Min­is­ter had stressed the new DPP will en­sure mod­erni­sa­tion of de­fence forces re­mains un­af­fected due to pro­ce­dural in­tri­ca­cies. The me­dia had also high­lighted the pro­posed DPP fo­cuses on re­duc­ing de­lays in pro­cure­ments by elim­i­nat­ing repet­i­tive pro­ce­dures; new clauses al­low­ing pro­cure­ments in through sin­gle ven­dor with proper jus­ti­fi­ca­tion; govern­ment readi- ness to pay 10 per cent ex­tra for prod­ucts bet­ter than oth­ers; new cat­e­gory of In­dige­nously De­signed De­vel­oped and Man­u­fac­tured (IDDM) as the most pre­ferred cat­e­gory for pro­cure­ments, and; the three ser­vices to each have ded­i­cated ‘Project Man­age­ment Units’ headed by two-star gen­eral rank of­fi­cers driv­ing all ‘Make’ projects re­lat­ing to re­spec­tive ser­vice.

‘Make’ pro­ce­dure was pro­posed to be di­vided in three subcategories: Make I in­volv­ing 90 per cent fund­ing of de­vel­op­ment cost by govern­ment; govern­ment re­fund­ing 100 per cent de­vel­op­ment cost in Make II in case re­quest for pro­posal (RFP) not is­sued within two years of de­vel­op­ing pro­to­type; and Make III re­served for mi­cro, small and medium en­ter­prises (MSMEs) for projects worth less than ` 3 crore. DPP 2016 was also to lay down bench­marks for se­lec­tion of pri­vate strate­gic part­ners from among In­dian or for­eign firms. Iron­i­cally, just be­fore re­lease of DPP 2016, the me­dia quoted the De­fence Min­is­ter say­ing that the is­sue of se­lec­tion of strate­gic

part­ner would take an­other two-three months as dis­cus­sions on the same were on­go­ing.

So, the most im­por­tant in­gre­di­ent of the new DPP linked with pri­vate sec­tor par­tic­i­pa­tion is still miss­ing, for which the pri­vate in­dus­try was wait­ing with baited breath to see the man­ner in which this is im­ple­mented since any loop­holes could be used to the dis­ad­van­tage of some, rather than en­sur­ing a level play­ing field.

Sig­nif­i­cantly, when Prime Min­is­ter Modi met top busi­ness­men of Saudi Ara­bia in Riyadh re­cently and asked them to in­vest in de­fence sec­tor in In­dia, they asked him why In­dian pri­vate sec­tor was not in­vest­ing ad­e­quately in our de­fence sec­tor. It is iron­i­cal that the is­sue of strate­gic part­ners has been left out de­spite the long time taken to de­fine the new DPP and es­pe­cially when the Dhiren­dra Singh Com­mit­tee had spelt out guide­lines for choos­ing strate­gic part­ners. It goes with­out say­ing that choos­ing strate­gic part­ners will have po­lit­i­cal con­no­ta­tions and will in­vari­ably change with dif­fer­ent rul­ing par­ties at the Cen­tre.

So why de­lay the de­ci­sion? What will be re­solved in next twothree months that could not be re­solved past sev­eral months — un­less the in­ten­tion is to let am­bi­gu­ity con­tinue? The plusses in the DPP 2016 in­clude in­tro­duc­tion of the new pro­cure­ment cat­e­gory ‘Buy (IDDM)’; buy­ing in­dige­nously de­signed, de­vel­oped and man­u­fac­tured prod­ucts with min­i­mum 40 per cent in­dige­nous con­tent, and if not de­signed and de­vel­oped in­dige­nously with min­i­mum 60 per cent in­dige­nous con­tent. ‘Buy (IDDM)’ should os­ten­si­bly re­place ‘Buy (In­dian)’ since lat­ter also now re­quires 40 per cent in­dige­nous con­tent in­stead of erst­while 30 per cent. How the ac­qui­si­tion process will be short­ened will need to be ob­served through the ap­pli­ca­tion of the new DPP on ground be­cause the stages of ac­qui­si­tion cy­cle re­main prac­ti­cally same.

Other plusses in­clude: Ser­vices Qual­i­ta­tive Re­quire­ments (SQRs) split into two cat­e­gories as es­sen­tial and de­sir­able (Es­sen­tial Pa­ram­e­ters A and Es­sen­tial Pa­ram­e­ters B) with con­tracts signed based on A and ven­dor per­mit­ted to de­velop B af­ter award of con­tract; Ser­vices Equip­ment Pol­icy Com­mit­tees (SEPCs) re­spon­si­ble for fi­nal­is­ing SQRs per­mit­ted to seek ex­pert as­sis­tance; RFPs will in­clude En­hanced Per­for­mance Pa­ram­e­ters (en­hanced ca­pa­bil­i­ties over and above the es­sen­tial pa­ram­e­ters) with ven­dors meet­ing ad­di­tional pa­ram­e­ters given weigh­tage up 10 per cent for de­ter­min­ing low­est bid; thresh­old for off­sets raised from ` 300 crore to ` 2,000 crore; pro­ce­dure de­fined to deal with change in name of ven­dor dur­ing pro­cure­ment cy­cle for any rea­son in­clud­ing merger, ac­qui­si­tions, etc; pro­vi­sion for adop­tion of a model wherein the for­eign ven­dor can se­lect an In­dian Pro­duc­tion Agency (IPA) from the pri­vate sec­tor of its choice when Min­istry of De­fence (MoD) has not nom­i­nated a DPSU for the joint ven­ture (JV) al­beit if sev­eral In­dian com­pa­nies tie up with the for­eign ven­dor, it will not be treated as ‘sin­gle ven­dor’; fund­ing of projects by the MoD in­creased from 80 per cent to 90 per cent, with bal­ance 10 per cent re­im­bursed (if RFP not is­sued within two years of suc­cess­ful de­vel­op­ment of pro­to­type) and de­vel­op­ment agen­cies given mo­bil­i­sa­tion ad­vance of 20 per cent of es­ti­mated cost of de­vel­op­ment; projects with es­ti­mated de­vel­op­ment cost of ` 10 crore un­der ‘Make’ cat­e­gory funded by MoD and ` 3 crore for ‘Make’ cat­e­gory self-funded by devel­op­ers will be ear­marked for MSMEs, opened to oth­ers only if MSMEs don’t evince in­ter­est; An­nual Ac­qui­si­tion Plan (AAP) for ‘Make’ projects to be no­ti­fied by MoD; shar­ing fu­ture mil­i­tary needs with in­dus­try through a Tech­nol­ogy Per­spec­tive and Ca­pa­bil­ity Roadmap (TPCR), cov­er­ing 15-years ac­qui­si­tion plans.

The mi­nuses be­sides the void of bench­mark­ing strate­gic part­ners in­clude: whether wholly-owned sub­sidiaries of for­eign com­pa­nies qual­ify as In­dian Off­set Part­ners (IOPs) is not ad­dressed; de­tailed off­set guide­lines not no­ti­fied; no changes men­tioned to the TPCR in vogue past decade and a half which hasn’t helped much; no worth­while changes in other pro­ce­dures in­clud­ing the Fast Track Pro­ce­dure (FTP); and chap­ter con­tain­ing the re­vised stan­dard con­tract doc­u­ment as well as var­i­ous an­nex­ures and ap­pen­dices not re­leased, with­out which DPP 2016 is quite in­com­plete.

So what was the great hurry in re­leas­ing it in­clud­ing when the is­sue of strate­gic part­ners re­mains un­ad­dressed? What can be more proof of hap­haz­ard and lop­sided func­tion­ing? But as they say, the proof of the pud­ding lies in its eat­ing. But while we await the miss­ing parts of DPP 2016, too much hanky-panky is go­ing on in the gov­ern­men­tal de­fence-in­dus­trial com­plex with con­nivance of MoD, Nis­hant fol­lowed by Akash fi­nally dumped af­ter crores and years wasted be­ing just two ex­am­ples. What we per­haps need is a mon­i­tor­ing body for de­fence pro­cure­ment in­de­pen­dent and above the MoD, with ad­e­quate pow­ers as part of the Par­lia­men­tary Stand­ing Com­mit­tee on De­fence. Fi­nally, poli­cies and pro­ce­dures don’t mat­ter much if there is in­de­ci­sive­ness and lack of will. When the De­fence Min­is­ter an­nounces ‘emer­gent’ pro­cure­ment of 50,000 bul­let proof jack­ets in 2014 and th­ese have still not ar­rived de­spite Army’s de­fi­ciency hav­ing gone up be­yond 3,50,000 what stream­lin­ing and fast-track­ing are we talk­ing about?

De­fence Min­is­ter Manohar Par­rikar ad­dres­si­ing the par­tic­i­pants of De­f­expo 2016 on March 28, 2016


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